When stock prices overshoot their true values but then return to those true values in time, this phenomenon is known as:

Question

Quizplus · Accepted Answer

Mean reversion is the theory suggesting that prices and returns eventually move back towards the mean or average. This mean can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.

When Stock Prices Overshoot Their True Values but Then Return